Interest is Prohibited in Islam: Interest, commonly known as Riba, is prohibited in Islam. Any dealing that involves interest shall not be undertaken by the Muslims. Interest, therefore, is haram and Muslims shall stay away from it. Yet, in modern times, everyone needs to get equipped with a bank account.
People prefer to put their money with banks as it is secure and convenient. Those who run a business need to get equipped with a bank account to make safe transactions. People who have undertaken jobs, also need to have a bank account as their salaries are poured into accounts rather than handing them down in cash form.
Current and Saving Accounts: We know that there are current accounts and saving accounts. The current accounts are not interest based. Keeping money in such accounts won’t help you earn interest. However, when you put your money in an interest-based account, the bank invests that money and let you earn interest over it.
Interest Based Accounts: However, some people argue that they are under compulsion to hold money in the interest-based account. For instance, if one is in a non-Islamic country, he might be forced to open up an interest-based account.
In such a case scholars allow Muslim to hold interest based account but not to use the money earned through interest as it is Haram. So that money shall be given away in charity.
Don’t use the money earned through Interest: When the question was raised in front of an Islamic scholar, Dr. Zakir if Muslims can have an account in an interest-based bank. He pointed out that most Muslim scholars allow Muslims to hold an interest-based account yet they are forbidden to use the money earned through interest. That money is haram and shall be put away in charity.
He, however, said that he personally disagrees with it. When people put their money in an interest-based account for security purpose, it is wrong. Even if the money is used up in charity, one has already gotten involved in Riba. He said that Allah Almighty has demanded us to not to get involved in Riba.
It is similar to dealing in drugs: If we open up such an account, we are encouraging and getting involved in Riba. He further gave an example to make his point clear. He said if one starts dealing in cocaine and alcohol and gives away the earned money in charity, is that okay?
Well certainly not, that is Haram. Having such a business is forbidden, even if you put away the money in charity, so how can you justify getting involved in Riba and saying that it is okay. Riba is a greater Haram as Allah and Prophet PBUH would start a war against one who gets involved in Riba.
So if any Muslim wants to put money in the bank for security purpose, he shall opt for a current account. If one has excessive saving, it can be invested in some business or real estate.
One can keep cash in lockers as well. But you cannot encourage or get involved in Riba. And Allah knows the best and he may guide us to the correct path.